ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When the price elasticity of demand is relatively elastic (−∞ < Ed < −1), the percentage change in quantity demanded is greater than that in price. Hence, when the price is raised, the total revenue falls, and vice versa.

Detailed explanation-2: -Price elasticity The demanded quantity falls? By how much? To answer these questions you need to know the price elasticity. If it is-3, this means that the quantity will fall by three times the percentage increase in price (e.g. a 1% increase produces a 3% fall).

Detailed explanation-3: -Demand for a good is relatively elastic if the PED coefficient is greater than one (in absolute value). Demand for a good is unit elastic when the PED coefficient is equal to one.

Detailed explanation-4: -Relatively elastic demand is when the proportionate change in demand is more than the proportionate change in the price. In other words, this means that a little change in the price shall cause more change in demand. Thus, the demand curve slopes downward from left to right. An example of this is luxury goods.

Detailed explanation-5: -Relatively Elastic Demand, (PED = 1 < x < ∞) The quantity demanded changes by a larger percentage than the change in price. For example, if the price of a product increases by 10% and then the demand for the product decreases by 15%, then the demand would be relatively elastic.